The global macroeconomics of a trade war: Findings from the EAGLE model

a column by Wilko Bolt, Kostas Mavromatis and Sweder Van Wijnbergen for VOX: CEPR’s Policy Portal

Increasing protectionism will slow down world trade and may dampen global economic growth.

This column examines the global macroeconomic consequences of a major trade conflict between the US and China, and shows that the two countries would be the biggest losers from a 10% ‘tit-for-tat’ trade war between them. As long as it does not get involved in the conflict, the euro area may temporally gain from trade diversion, as competitiveness improves and imports from regions whose exports are blocked elsewhere become cheaper.

Continue reading

---